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Tax Notes Today Quotes Michael Pfeifer: U.S. Expatriations Likely Won't Increase Further in Future, Practitioner Argues

October 25, 2013, Tax Notes Today

Tax Notes Today spoke with Michael G. Pfeifer regarding the record number of U.S. citizen expatriations in 2013 and the unlikeliness that the surge will increase dramatically. The process of expatriation is complicated, including associated high costs and certifying that U.S. tax returns have been filed for the previous five years. For the complete article, please visit Tax Notes Today's website (subscription required).

Excerpt taken from the article "U.S. Expatriations Likely Won't Increase Further in Future, Practitioner Argues" by Andrew Velarde for Tax Notes Today.

Michael G. Pfeifer of Caplin & Drysdale said he would be surprised by a further surge in U.S. citizen expatriations, noting the complications involved with expatriation. 

Those complications include the requirement that all expatriating individuals certify that they have filed U.S. tax returns for the previous five years, Pfeifer said. That obligation could lead individuals to file returns that they had previously ignored.

"There's a cost to doing this five-year certification," said Pfeifer, who worked on the Clinton administration's expatriation tax proposal while at the IRS. "It's a big cost to leave."

Pfeifer spoke as a panelist at the University of San Diego School of Law-Procopio International Tax Institute Annual Conference.

While noting recent high-profile expatriations like that of Eduardo Saverin of Facebook, Pfeifer said that in addition to the cost of completing the returns, most individuals simply don't want to leave the U.S.

Pfeifer attributed the current increase in expatriations to a variety of factors, including the offshore voluntary disclosure initiative that started in 2009 and the enactment of the Foreign Account Tax Compliance Act in 2010. Pfeifer also said that a disproportionate number of Koreans and Indonesians are reflected in the Federal Register because these countries do not permit dual nationalities.

Pfeifer said he expects expatriations to continue from "accidental citizens" whose lives are overseas and have little connection to the U.S.

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